Tuesday 24 March 2009

Still waiting for deflation

Today's inflation numbers were bad, although you wouldn't know it listening to any journalists.

The headline consumer price index increased to 3.2 percent, up from 3 percent in January. So did the retail price index (excluding housing and indirect taxes). This second indicator is now running at 3.5 percent.

The retail price index did fall to to zero, essentially for two reasons; the Bank of England cut interest rates to zero, and therefore pushed down mortgage repayments; while the government cut VAT. Both affect the RPI.

Price sub-indices confirm that inflationary pressures are actually increasing. Here are two such measures for food and household maintenance. The former increased by over 12 percent over the last year; the latter increased by over 7 percent. Both are ticking up sharply.

So where is this deflation that the Bank of England used to justify a zero interest rate policy? It is lurking in the over-excited imaginations of the MPC, but we can't see it down at the supermarket.

It is hard to exaggerate the mess we are in right now. Every key macroeconomic indicator is heading the wrong way; inflation is up, the economy is in recession; and unemployment is rising. The Bank of England hasn't met its inflation target for years.

Likewise, every macroeconomic policy instrument is being abused; zero interest rates; a massive fiscal deficit, and that ridiculous VAT cut. To add to this lunacy, the Bank of England has started to print money.

We are buried so deep in trouble that we can no longer see daylight.

8 comments:

Chris said...

I haven't heard this word while I have lived in the UK so I am not sure if it is a US only word or not but the word "Stagflation" comes to mind.

Anonymous said...

Alice, they can always claim their policies averted deflation and there will be no evidence to refute that.

Several hundred billion dollars were expended on the Y2K problem, but on Jan 1 2000 no planes fell from the sky, no reactors exploded and the Earth remained in orbit. The media response was a loud "HAH! Where's your Y2K disaster?" Was there a problem (and thus tackled) or not? Do we need to see evidence of failure before we can believe the problem exists?

I don't disagree with you, and I'm sure someone pushed the RPI figure into newsrooms to scare the public with deflation - but the truth is they'll get away with this.

Anonymous said...

I think the trouble will come in the next 5-6 months. As the effects of higher petrol prices last summer depress the CPI, the media (which I think has noticed the current rises) will heave a sigh of relief and we will see more and more stories about 'Will the CPI go negative? Is deflation coming?' Etc etc.

Of course we all know that once you get over the hump in pterol prices, come autumn/winter, there will be nothing to keep the indices down. VAT is scheduled to go back on in December I think. Oil is more now than it was before Christmas (and currently rising). It looks like a perfect storm for inflation to be rising 4%+ by year end 2009.

Govt/BoE will do nothing, it will ignore the CPI rising, and concentrate on the RPI which will be lower for longer due to the rate cuts. Even that will start to rise as the effects move out of the index. By the time anyone starts to raise rates, reverse QE, raise taxes/cut spending, it will be too late.

Double digit inflation here we come.

Anonymous said...

@Chris, the word "stagflation" was coined by Iain Macleod, a British politician of the 1960s.

Anonymous said...

The RPI divergence from the CPI is amazing.

Anonymous said...

You are aware that all three inflations measures are heading down overall though. Sure, two of them headed up this month, but don't you know the definition of trend? You can't go, "Oh the CPI was 3% last month, and 3.2% in February, therefore we're in for inflation not deflation." Except you're basing this on TWO DATA POINTS. What you have to do is look at the overall trend, and 2/3 of the way through 2008 to now, all three inflation measures are going downwards. I mean for goodness sake, near the start of 2008 you can see on the graph a tiny dip in the CPI, so by your logic we should've expected to see deflation. Except straight after, the CPI had a steep climb until 2/3 of the way through 2008.

Seriously, your graph reading skills are woeful.

Chris said...

@dearieme, very interesting, thanks!

Anonymous said...

成人電影,情色,本土自拍, 寄情築園小遊戲, AV女優,成人電影,情色,本土自拍, A片下載, 日本A片, 麗的色遊戲, 色色網, ,嘟嘟情人色網, 色情網站, 成人網站, 正妹牆, 正妹百人斬, aio,伊莉, 伊莉討論區, 成人遊戲, 成人影城,
ut聊天室, 免費A片, AV女優, 美女視訊, 情色交友, 免費AV, 色情網站, 辣妹視訊, 美女交友, 色情影片 成人影片, 成人網站, A片,H漫, 18成人, 成人圖片, 成人漫畫, 情色網, 日本A片, 愛情公寓, 情色, 舊情人, 情色貼圖, 情色文學, 情色交友, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 色情遊戲, 情色視訊, 情色電影, aio交友愛情館, 色情a片, 一夜情, 辣妹視訊, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊, 視訊美女, 美女視訊, 視訊交友, 視訊聊天, 免費視訊聊天室, 情人視訊網影音視訊聊天室, 視訊交友90739, 成人影片, 成人交友, 本土自拍, 免費A片下載,

美女交友, 嘟嘟成人網, 成人貼圖, 成人電影, A片, 豆豆聊天室, 聊天室, UT聊天室, 尋夢園聊天室, 男同志聊天室, UT男同志聊天室, 聊天室尋夢園, 080聊天室, 080苗栗人聊天室, 6K聊天室, 女同志聊天室, 小高聊天室, 情色論壇, 色情網站, 成人網站, 成人論壇, 免費A片, 上班族聊天室, 成人聊天室, 成人小說, 微風成人區, 色美媚部落格, 成人文章, 成人圖片區, 免費成人影片, 成人論壇, 情色聊天室,


性愛,
成人交友, 嘟嘟成人網, 成人電影, 成人, 成人貼圖, 成人小說, 成人文章, 成人圖片區, 免費成人影片, 成人遊戲, 微風成人, 愛情公寓, 情色, 情色貼圖, 情色文學, 做愛, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 寄情築園小遊戲, 色情遊戲情色視訊, 情色電影, aio交友愛情館, 言情小說, 愛情小說, 色情A片, 情色論壇, 色情影片, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊美女, 視訊交友, 視訊聊天, 免費視訊聊天室, a片下載, aV, av片, A漫, av dvd, av成人網, 聊天室, 成人論壇, 本土自拍, 自拍, A片,成人電影,情色,本土自拍,